Dexia bank could be dismantled

The Franco-Belgian bank is looking at drastic measures to face up to financial difficulties

FRANCO-BELGIAN bank Dexia could become the first European bank to fall victim to the economic crisis.

There is speculation over the future of the bank, which is best known for financing local authorities, after bosses said, following a six-hour board meeting, that it is looking at various sell-offs and mergers so as to face up to “structural problems”.

For Le Figaro this amounts to the bank “selling off the family jewels”, while Les Echos said “the Dexia shareholders are preparing to dismantle it”.

It is said one of the measures to result could be a new bank to finance French local authorities in a partnership between one arm of Dexia – Dexia Crédit Local – the state bank Caisse des Dépôts and la Banque Postale.

Elements sold off could include a Turkish subsidiary, Denzibank, share management and private banking services and a Belgian retail banking branch.

Belgian Finance Minister Didier Reyners has said the French and Belgian governments are folllowing the situation closely and will “intervene if necessary”.

Last month Dexia faced claims it had sold high-risk loans (linked to the Euro to Swiss Franc exchange rate) to many local authorities which were now facing financial difficulty.